Psoriasis is a chronic inflammatory skin disorder that poses significant challenges regarding effective and targeted drug delivery. Bioactive substances like betulin have shown tremendous utility in treating these conditions; however, they pose limited utility owing to their physicochemical characteristics. Here, we aimed to develop a novel topical dosage form for treating psoriasis, utilising betulin-loaded solid lipid nanoparticles (NLCs) incorporated into a hydrogel matrix. The optimization of the formulation was meticulously conducted using a design of experiments methodology, and its diverse physicochemical attributes were thoroughly examined. Evaluating betulin's in vitro release pattern from the NLC-hydrogel demonstrated consistent and regulated drug release properties. Additionally, the formulation demonstrated improved skin penetration abilities as determined by in vitro skin permeation experiments employing Franz diffusion cells- furthermore, the therapeutic effectiveness of the betulin-NLC-hydrogel was assessed by an in vivo experiment carried out using an imiquimod-induced psoriasis-like skin inflammation model in BALB/c female mice. The NLCs exhibited a pH of 5.67±0.86, particle size of 148.16±12.66 nm, and zeta potential of -22.84±2.37 mV, ensuring stability and suitability for topical use. The gel, with a pH of 6.05±0.43 and viscosity of 17550±120 cPs, showed enhanced skin hydration and lipid restoration. Drug release studies indicated a slower release from NLCs and gel, improving skin retention. Stability tests revealed that the formulations were stable at room temperature but not at elevated temperatures. The in vitro safety profile of the formulation revealed no significant adverse effects on HaCaT cell lines. The NLC gel demonstrated significant anti-psoriatic activity, reducing inflammation and cytokine levels. The betulin-NLC-hydrogel formulation exhibited promising characteristics for the topical treatment of psoriasis, showcasing optimised drug delivery, sustained release, and notable therapeutic efficacy. The findings from this study provide a foundation for the potential clinical translation of this innovative topical dosage form for improved psoriasis management.